If You're A Consumer Startup, Don't Bother Asking Andreessen Horowitz For Series A Money

Andreessen Horowitz, commonly referred to as A16Z, is a
4-year-old venture capital firm that exploded on the scene with
investments in startups like Pinterest, Github and Twitter.

While it's
happy to dump tens — or even hundreds — of millions into later
stage companies, it by and large avoids making Series A
investments in consumer startups.

Series A
investments are typically raised to help startups scale from the
idea stage to the money-making stage. It's often the second batch
of money an entrepreneur raises, following a "seed" round, which
helps a startup idea get off the ground.

One of
A16Z's partners Scott Weiss told the Wall Street Journal that
as a matter of principle, his firm tries to stay away from Series
A investments in consumer startups. It has found that too many
companies are unproven at that stage, and they raise millions of
dollars only to later "pivot" — change ideas — or fail.

It's true that
A16Z has paid big bucks to get into later stage companies. It
invested in Foursquare, Lyft, Pinterest and Fab's Series B
rounds. But occasionally the firm makes exceptions.

It put
$100 million into GitHub's Series A round, for example, however the
company was already making a lot of money by that time. It's also
an enterprise company, not a consumer company. In addition, A16Z
invested
$15 million in Rap Genius' "venture" round (essentially a
Series A), but the lyric analysis company already had a lot of
traffic and users. The firm has made five Series A investments
this year, WSJ reports. Last year it made nine.

While A16Z stays away from Series A rounds, it will take a chance
on even earlier consumer startups and put money into seed stages.
The firm has a relationship with startup accelerator Y
Combinator. It also recently invested in a startup that hasn't
launched yet, Clinkle.
Clinkle is a payment startup that raised a $25 million seed
round. There were a lot of investors in the round though, so
A16Z didn't have to forfeit a ton of money to participate.

A16Z's Weiss likened consumer startups in the Series A stage to
"fruit fly experiments," of which his firm doesn't want to
partake. But enterprise companies are a whole different game.
"There isn’t a better time to be an enterprise investor,"
he said.